10 Critical Mistakes in System Selection

Feb 27, 2008 2:09 AM  By

I had a call from a multichannel company just this past week about why its order management system selection process had failed. In this merchant’s case, it had signed the vendor agreements prematurely, only to find out two weeks later that the bid was incomplete.

There weren’t any estimates for modifications, interfaces, conversion and training costs. As a result, the marketer had been pushed by the vendor to “get into the implementation queue and work out the details later.” Now that the implementation is planned, the company discovered its costs will be 50% higher than originally thought!

Here are the 10 major mistakes we see companies make in selecting these systems:

1) Not having the right project team in place to select and implement a new application. It is critical to make sure you have a team that can work together with representatives from each department, and a strong project manager. The project team must be able to make timely decisions and keep the executive sponsors up to date with the progress of the project.

2) Failure to develop detailed business requirements with current and future business needs. Developing a request for proposal (RFP) is necessary for comparing multiple vendor applications, modifications and services, and in developing a gap analysis based on RFP responses. Applications are not always comparable with one another, and understanding which is the highest fit with your business is paramount.

3) Limiting the search to a few vendors too early in the selection process. Keep your options open and work towards documenting the business requirements. Once the vendors have your RFP and have responded, you can then base your decisions on how well various applications address your functional requirements.

4) Not conducting a competitive bid process. Not comparing multiple vendors, their product offerings, services and maintenance plans can be a major point of failure. How do you know that you are getting the best application and partner company for your investment? Are you blindly willing to sign a contract with a vendor because a salesman is enticing you with deep discounts? Chances are, you are leaving on the table, and it might not be the best decision for your company.

5) Picking technology over application function. Technology has its place in the decision process, along with functionality. IT departments are having a greater say in the decision making process due to the necessity for communication with other applications.

On the other hand, having leading edge technology doesn’t always mean that it has the best application functionally. Balance your IT requirements with functional requirements and make a decision that moves the company forward overall. Buying an application with the latest and greatest technology will become a very expensive endeavor if it’s limited in functionality.

6) Planning too many application modifications vs. adapting your business processes to the application’s functionality. At times, modifications are necessary and critical to managing a business. But more often than not, companies are quick to modify an application instead of challenging departments to see if they can change a business process to fit an application. Modifications can create unnecessary risks and become expensive. We often see companies modify an application, only to remove those program changes a season or two later after they fully understand the vendor’s application. Companies should only plan to modify the application if all other avenues have been discussed and no alternative is suitable.

7) Relying on superficial demos to cover your most critical requirements. Letting the vendors determine what will be reviewed and discussed in a demo means you will see what they do really well. But the demo will not address specific areas of concern to you or the areas in which the vendor may not be so strong. Use your RFP responses to develop a demo agenda, as this will ensure that your business needs are covered. These demos in conjunction with the RFP responses will help you to better perceive the gaps between applications.

8) Not putting enough time and effort into vendor reference checks. This is one of the most critical steps in the process. It is where you get a feel for how other customers use the application and vendor support. Once you have narrowed things down to your finalist, the reference checks with their user base will allow you to understand how strong the vendor’s support is. Ask:

  • How problematic are the vendor upgrades?
  • Is the user group active?
  • How is the implementation process?
  • Did they stay on budget?

Try to reach out and talk with as many of the finalist’s customers as possible. Ask for the full customer file, not just the handful of customers they want you to talk to.

9) Signing vendor contracts before the total investment for hardware, software, maintenance and services has been identified. Oftentimes companies do not know the full investment necessary for the various solutions. Vendor proposals aren’t always so clear and easy to understand. You need to make sure that you understand the full year-one investment from hardware to software as well as maintenance (due in year one and all future years), project management fees, implementation fees, integration costs, file conversion costs, modifications, etc.

Compare the fully loaded year-one investments and extrapolate them out to three years. Make sure you know the pricing models for licensing as you grow. A solution that has a low year-one investment may become more expensive after three years than one that has a higher year-one investment.

10) Not having an intellectual property attorney review the vendor contracts and statements of work before signing them. Vendor contracts for the most part lean in favor for the vendor. Knowing what to look for and how to negotiate the best contract for you will insure that all the homework you have done to date doesn’t go to waste. An intellectual property attorney understands software licensing and services contracts, which are vastly different from any other contract. Not all attorneys are capable of thoroughly reviewing these agreements. A good lawyer will show you how to work towards a fair and balanced contract for both you and the vendor.

Brian Barry is a senior consultant with F. Curtis Barry & Co., a multichannel operations and fulfillment consulting firm www.fcbco.com.

Executives from F. Curtis Barry & Co will be presenting “Selecting and Implementing the Right System” at the National Conference on Operations & Fulfillment April 8-10 in Orlando. For more information visit www.ncof.com